Ku-ring-gai Council v Ichor Constructions Pty Ltd

Case •

[2018] NSWSC 610

•

08 May 2018

No judgment structure available for this case.

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Ku-ring-gai Council v Ichor Constructions Pty Ltd [2018] NSWSC 610
Hearing dates: 24/04/2018
Date of orders: 08 May 2018
Decision date: 08 May 2018
Jurisdiction:Equity - Commercial Arbitration List
Before: McDougall J
Decision:

Summons dismissed with costs.

Catchwords:

COMMERCIAL ARBITRATION – consideration of s 27D of the Commercial Arbitration Act 2010 (NSW) – discussion of requirements for arbitrator to act as mediator – where arbitrator so acted – arbitrator’s mandate terminated pursuant to s 27D(6) absent subsequent written consent of the parties – whether such consent can be inferred from the written record of the transcript – such inference of consent impermissible – consequently no written consent provided.

   

COMMERCIAL ARBITRATION – statutory waiver – consideration of s 4 of the Commercial Arbitration Act 2010 (NSW) – whether first defendant waived its right to insist on written consent – s 4 requires actual knowledge of the provision which is to be waived – no such knowledge in present case – no waiver established.

  EQUITY – whether first defendant estopped from insisting on written consent – no evidentiary basis for either conventional estoppel or estoppel by representation – no detriment suffered by plaintiff in any event – proceedings dismissed.
Legislation Cited: Commercial Arbitration Act 2010 (NSW)
UNCITRAL Model Law on International Commercial Arbitration 1985
Cases Cited: Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570
Hopeshore Pty Ltd v Melroad Equipment Pty Ltd (2004) 212 ALR 66
Overmyer Industrial Brokers Pty Ltd v Campbells Cash and Carry Pty Ltd [2003] NSWCA 305
Texts Cited: Australian Oxford Dictionary
Commercial Arbitration in Australia (LawBook Co, 2nd edition, 2013)
Macquarie Dictionary
Report of the 18th Session of the United Nations Commision on International Trade Law
Category:Principal judgment
Parties: Ku-ring-gai Council (Plaintiff)
Ichor Constructions Pty Ltd (First Defendant)
John Tyrril (Second Defendant)
Representation:

Counsel:
Dr CJ Birch SC (Plaintiff)
M A Ashhurst SC / L D Corbett (Defendants)

  Solicitors:
HWL Ebsworth (Plaintiff)
BCP Lawyers & Consultants (First Defendant)
File Number(s): 2018/110112

Judgment

  1. HIS HONOUR: Section 27D(1) of the Commercial Arbitration Act 2010 (NSW) (the Act) provides that on certain conditions, an arbitrator may act as a mediator in arbitration proceedings before him or her. Section 27D(4) provides that an arbitrator who has acted as a mediator may not thereafter conduct arbitration proceedings in relation to the dispute unless the parties, on or after termination of the mediation, give their written consents.

  2. In this case, the second defendant (the Arbitrator) was an arbitrator hearing a dispute between the plaintiff (the Council) and the first defendant (Ichor). Ichor says that in the course of that arbitration, the Arbitrator acted (with the prior written consent of the parties) as a mediator, and that thereafter, he resumed the conduct of the arbitration without the parties’ written consents that s 27D(4) requires. The Council contends that the Arbitrator was entitled to proceed with the arbitration once the mediation terminated. Its summons seeks relief accordingly.

  3. The essential questions raised for decision are:

  1. did the Arbitrator act as a mediator, so as to engage s 27D of the Act?

  2. If the Arbitrator did so act, did the parties give their written consents before he resumed the conduct of the arbitration?

  3. If those consents were required and had not been given, has Ichor nonetheless waived its right to object to the Arbitrator’s having resumed the conduct of the arbitration?

  4. Alternatively, is Ichor estopped from asserting that the requirements of s 27D(4) were not met?

Factual background

  1. The Council and Ichor were parties to a construction contract. The contract contained an arbitration clause. The Council and Ichor fell into dispute. The Council said that it had overpaid Ichor, and was entitled to recover the amount of the overpayment. In addition, the Council claimed it was entitled to liquidated damages for delay and to general damages. Ichor claimed that it was entitled to damages for delay caused (it said) by the Council and the Council’s consultants.

  2. Those disputes were referred to the Arbitrator. He accepted the arbitration, by agreement made 16 March 2016.

  3. The arbitration hearing commenced on 2 March 2018. It continued, over twelve hearing days, to 29 March 2018. It would seem that a very considerable bulk of documentary material was inflicted upon the Arbitrator.

  4. Before the luncheon adjournment on the last day (as I find, although there is some divergence in the evidence as to the precise time), the Arbitrator had an “off the record” discussion with the parties. He asked, in substance, whether the parties would consent to his putting forward a proposal for settlement.

  5. The parties, having considered the Arbitrator’s question, signified their agreement to the proposed course of action. They agreed that the luncheon adjournment (apparently, normally one hour) would be shortened so that the Arbitrator could put his proposal for settlement. At about 1:45pm, and before any proposal was put, the Arbitrator (as I find; again there is some divergence in the evidence) drew attention to the need for written consent. Mr Debuse of Counsel, who was then appearing for the Council, prepared a short handwritten document. Leaving aside formal parts, it reads:

The parties consent to [the Arbitrator] acting as mediator pursuant to s 27D of the Commercial Arbitration Act for the purpose of putting forward a proposal for the resolution of the dispute between the parties.

  1. The document was signed on behalf of the Council and Ichor, and by the Arbitrator.

  2. Once the document had been signed, the Arbitrator suggested that everyone move from the hearing room to a “breakout room”, expressing a preference “to conduct the mediation in a less formal room”. That was done. At that time, it would seem, the Arbitrator and Mr Debuse had referred to the terms of s 27D. It does not appear that the parties themselves had done so.

The mediation

  1. In my view, the best evidence of what was said and done in the breakout room comes from Mr Keene, who was then one of the solicitors assisting Ichor and instructing its counsel Mr Duggan. I do not express any doubt as to the honesty of any witness. On the contrary, each witness seemed to me to be doing his best to give honest, complete and accurate evidence. My point is simply that Mr Keene appears to have the best recollection, and that his evidence is based upon a note that he typed up immediately after the mediation terminated. By contrast, the evidence on this topic of Messrs Dissanayake and Taylor, two of the solicitors assisting the Council and instructing Mr Debuse, is based on very brief file notes prepared by one of them. I add that, in the course of submissions, Dr Birch of Senior Counsel, who appeared for the Council before me, appeared to accept the substantial accuracy of Mr Keene’s file note.

  2. Mr Keene’s file note is headed:

Mediation: s 27D Application (29 March 2018).

  1. Mr Keene then described those who were present. He appears to have been mistaken because he omitted the names of several people who were, including Mr Dissanayake. However, Mr Keene’s affidavit makes it clear that Mr Dissanayake was present as were Mr Dreghorn, an officer of the Council, and Mr Filis, the principal of Ichor.

  2. Mr Keene’s note of what the Arbitrator said in the mediation reads as follows:

1.   Expressed his concern about the complexity of the matter. Out of proportion with respect to the quantum of what is claimed. Every minute the case goes on the more complex it gets.

2.   He believes that both parties believe their case is a good one but he believes that each party bears significant risks and both parties will be unlikely to be happy with the result. He later said that one party could be very unhappy.

3.   Mr Tyrril had originally blocked out December 2017, January 2018 and February 2018 to hear the case but as a result of the vacation that was superfluous, notwithstanding that he had rejected various expert determinations, mediations and arbitrations to do so. It was unfortunate that that had happened.

4.   He now has other commitments pending, some overseas (through May 12th), some as President of the Dispute board (for some red-line matters about some civil works) and it will be some time until he gets to it and it will take him months to decide. He has considerable work to do on those other matters.

5.   Has done close to 400-500 mediations on bridges, roads and tunnels etc.

6.   He prognosticated that his decision will no doubt lead to an appeal which will result in further litigation on behalf of the parties.

7.   He said that he was not giving an insight to his decision. He said that his advice was not prejudicial to his decision but just an assessment of what he had absorbed over the Hearing. It was in no way an indication of the side; he was going to come down on. He still needs to sift through all the evidence.

8.    Barristers had been wonderful and extremely helpful.

9.   Advice: He suggested a course which he believed was reasonable, being: Council drop its claim for liquidated claims, Ichor drops its delay claim and each party walk away and ‘stomach its cost’. He understood that that position would not doubt be unpalatable and rejected.

10.   Ultimately, it was a decision for Council to consider and a question for Ichor as to whether it wanted to make a commercial decision and ‘move on’.

11.   Mr Tyrril departed the room and so did Council.

  1. As will be apparent, the parties did not accept the Arbitrator’s proposal. He inquired whether counsel were prepared to resume the hearing (Mr Debuse had been engaged in closing submissions for the Council, and Mr Duggan’s closing submissions were to follow). They said that they were, and the hearing continued.

First issue: did the Arbitrator act as a mediator?

  1. The question may be rephrased: were there “mediation proceedings” to which s 27D(4) of the Act applied? I do not think that it is necessary to refine the question too closely.

The parties’ submissions

  1. In dealing with this and subsequent issues, I shall give only a very brief summary of Counsel’s submissions, sufficient to give some understanding of the way the debate was conducted.

  2. Dr Birch submitted that the Arbitrator had not acted in a way that mediators frequently did and do. For example, he had not held discussions with one party in the absence of the other. Nor had he received any information from either party that could be regarded as confidential. In truth, Dr Birch submitted, what the Arbitrator put to the parties was no more than a judge might say in open court, in urging parties to settle.

  3. Dr Birch relied on the decision of Branson J in Hopeshore Pty Ltd v Melroad Equipment Pty Ltd [1] . In that decision (which was concerned with an application for security for costs), her Honour referred to mediation as a process whereby parties to a dispute could be assisted in identifying options for its resolution[2] .

    1. (2004) 212 ALR 66.

    2. At [31].

  4. Mr Ashhurst of Senior Counsel, who appeared with Mr Corbett of Counsel for Ichor, submitted that it was enough that:

  1. the Arbitrator had sought the parties’ consent to act as a mediator, for the purpose of putting a proposal for settlement to them:

  2. the parties had given that consent;

  3. thereafter, the Arbitrator had done what he proposed and the parties had agreed; and

  4. objectively, everyone thought that they were participating in a mediation, and acted accordingly.

  1. Mr Ashhurst submitted that the construction for which Dr Birch contended – that the court should be required to examine what had happened pursuant to the written consents, and to decide whether it amounted to a “mediation” – would not promote certainty and would undermine the utility of s 27D.

Decision

  1. I start by setting out s 27D of the Act:

27D      Power of arbitrator to act as mediator, conciliator or other non-arbitral intermediary

(1)     An arbitrator may act as a mediator in proceedings relating to a dispute between the parties to an arbitration agreement (mediation proceedings) if:

(a)     the arbitration agreement provides for the arbitrator to act as mediator in mediation proceedings (whether before or after proceeding to arbitration, and whether or not continuing with the arbitration), or

(b)     each party has consented in writing to the arbitrator so acting.

(2)     An arbitrator acting as a mediator:

(a)     may communicate with the parties collectively or separately, and

(b)     must treat information obtained by the arbitrator from a party with whom he or she communicates separately as confidential, unless that party otherwise agrees or unless the provisions of the arbitration agreement relating to mediation proceedings otherwise provide.

(3)     Mediation proceedings in relation to a dispute terminate if:

(a)     the parties to the dispute agree to terminate the proceedings, or

(b)     any party to the dispute withdraws consent to the arbitrator acting as mediator in the proceedings, or

(c)     the arbitrator terminates the proceedings.

(4)     An arbitrator who has acted as mediator in mediation proceedings that are terminated may not conduct subsequent arbitration proceedings in relation to the dispute without the written consent of all the parties to the arbitration given on or after the termination of the mediation proceedings.

(5)     If the parties consent under subsection (4), no objection may be taken to the conduct of subsequent arbitration proceedings by the arbitrator solely on the ground that he or she has acted previously as a mediator in accordance with this section.

(6)     If the parties do not consent under subsection (4), the arbitrator’s mandate is taken to have been terminated under section 14 and a substitute arbitrator is to be appointed in accordance with section 15.

(7)     If confidential information is obtained from a party during mediation proceedings as referred to in subsection (2) (b) and the mediation proceedings terminate, the arbitrator must, before conducting subsequent arbitration proceedings in relation to the dispute, disclose to all other parties to the arbitration proceedings so much of the information as the arbitrator considers material to the arbitration proceedings.

(8)     In this section, a reference to a mediator includes a reference to a conciliator or other non-arbitral intermediary between parties.

Note.

There is no equivalent of this section in the Model Law.

  1. The Australian Oxford Dictionary [3] defines the verb “mediate” as, relevantly, to “intervene (between parties in a dispute) to produce agreement or reconciliation”; to “be the medium for bringing about (a result)”. (Other less relevant definitions do not need notice). That definition is consistent with the Macquarie Dictionary online, which also defines mediation as “action in mediating between parties, as to effect an agreement or reconciliation”. A mediator is, relevantly, a person who mediates.

    3. Second Edition, 2004.

  2. Perhaps unfortunately, the proper construction of s 27D (in particular, its references to “mediator” and “mediation”) is not something that can be resolved simply by reference to dictionaries.

  3. The Act contains no definitions of mediation. However, s 27D itself gives some guide as to what the legislature considered was involved. By subs (2)(a), the mediator “may communicate with the parties collectively or separately”. Subsections (2)(b), (7) contemplate that a mediator may, but will not necessarily, obtain confidential information from one party during mediation proceedings. Perhaps most helpfully for present purposes, subs (8) extends the concept of “mediator” to include “a conciliator or other non-arbitral intermediary between parties”.

  4. Subsection (8) suggests that the essential contrast between the function of an arbitrator and that of the mediator is that the latter is acting in a “non-arbitral” capacity. The core function of an arbitrator is to hear and decide, on both an interim basis and (by award) a final basis, disputes between parties to an arbitration agreement that are referred to the arbitrator for resolution. That of course is to take place in accordance with the requirements of both the arbitration agreement and the Act, including the statutory obligation to treat the parties with equality and give them each a reasonable opportunity of presenting their cases (s 18).

  5. By contrast, a mediator is not required to hear the parties, or to give them an opportunity to present their cases, or (most importantly) to decide their dispute. The core function of a mediator is to seek to bring the parties to agreement so as to resolve their dispute, and to decide the best way of doing that. It is obvious in principle, and commonly the case, that:

  1. a mediator may employ a number of different techniques in seeking to bring the parties to an agreement;

  2. the techniques employed may vary from mediation to mediation, and will reflect at least in part the mediator’s skill in choosing the most appropriate techniques for the particular parties and the particular dispute; and

  3. the kinds of outcomes that may be procured by mediation extend well beyond those that may be the subject of an arbitral award.

  1. In the present case, when the Arbitrator conducted the mediation and put to the parties his specific proposal as to how they might resolve their differences, he was acting in a non-arbitral capacity. It is not part of the core function of an arbitrator to bring about a settlement by compromise.

  2. I accept that it may be proper for a judge to suggest to parties that they should negotiate in an attempt to settle their differences. I accept, also, that it may be appropriate for a judge to point out the advantages of compromise, including the achievement of certainty, perhaps a saving in costs, and the possibility of a result that could not be the subject of judicial decision having regard to the issues posed to the court. I am prepared to accept, finally, that it may be open to an arbitrator, acting as an arbitrator, to make the same suggestions to parties, for the same reasons.

  3. As I have noted, Dr Birch submitted that it would have been open to the Arbitrator, acting as arbitrator, to put to the parties in the course of the arbitration that each party should drop its claims, walk away, and “stomach its cost”. I am not prepared to agree without serious reservation that is appropriate for an arbitrator (or for that matter a judge) to go beyond urging upon the parties the merits of compromise, and to suggest to them a specific way in which they could achieve that result. Although I suppose there may be circumstances where that might not be inappropriate, my instinct is that those circumstances, if they exist at all, would be rare indeed. However, it is not necessary to express a concluded view.

  4. I return to the discussions that took place in the off the record meeting between the Arbitrator and the lawyers before the luncheon adjournment. It is common ground between Messrs Taylor and Keene, who were both present, that in the course of that discussion the Arbitrator said that he would like to put something for the parties’ consideration, but would only do so, “under the cloak of mediation”. The parties agreed to that suggestion.

  5. When the arbitration hearing resumed at 1:45pm, the Arbitrator referred to the need for writing. That can only have been a reference to s 27D(1). It is consistent with the Arbitrator’s believing, and making clear to the parties, that in putting his proposal before them, he would be acting as a mediator.

  6. Thereafter, as I have said, Mr Debuse prepared a form of consent in accordance with s 27D(1) and it was signed on behalf of the parties and by the Arbitrator. Clearly, the Arbitrator and the parties thought that they were about to embark upon mediation. Even if the parties themselves were not aware of the terms of s 27D, they were aware, from what the Arbitrator had said as to “the cloak of mediation”, that they were going to attempt mediation, with the Arbitrator acting as mediator.

  1. What happened thereafter, and before the arbitration resumed (or purportedly resumed), did not follow the course that mediations frequently do. In particular, there were no individual sessions (between the Arbitrator, acting as mediator, and one side or the other), and the Arbitrator did not convey proposals for settlement from one side to the other. Nonetheless, the Arbitrator put a specific settlement proposal for the parties’ consideration. Because the parties rejected it, the mediation came to an end.

  2. It seems to me to be very difficult to conclude that, on the day, the Arbitrator, the parties and the parties’ legal advisers were all mistaken as to what was to happen, and did happen, once the s 27D(1) consent had been signed and before the Arbitrator purported to resume acting as arbitrator. Why should the court come to a different view to the parties, by poring over the minutiae of the Arbitrator’s and the parties’ conduct in the breakout room?

  3. On the Council’s approach, there could have been no mediation until something further happened. What was that “something else”? It is unclear to the point of opacity how far matters should have proceeded before what happened could amount to a mediation. Was it necessary, for example, that the Arbitrator (acting as mediator) should speak to one party or the other in private? Was it necessary that the Arbitrator should speak to the parties’ representatives in the absence of their lawyers? Was it necessary that one party, although rejecting the “walk away” approach, should nonetheless put some other proposal to the Arbitrator to be conveyed to the other party?

  4. More generally, what is the essential distinguishing feature of a mediation that was missing in the present case? What is the line that, objectively, divides facilitated non-mediatory discussions from mediation?

  5. The submissions for the Council leave all those issues unresolved. As Mr Ashhurst submitted, the Council’s position is productive of uncertainty, and uncertainty is inconsistent with the fair and final resolution of disputes without unnecessary delay or expense (see s 1C(1) of the Act).

  6. I return to the decision of Branson J in Hopeshaw. I start by setting out in full what her Honour said at [30] to [32]:

[30]    Mediation has been defined as follows (National Alternative Dispute Resolution Advisory Council: Alternative Dispute Resolution Definitions, reprinted March 2000, p 5):

Mediation is a process in which the parties to a dispute, with the assistance of a neutral third party (the mediator), identify the disputed issues, develop options, consider alternatives and endeavour to reach an agreement. The mediator has no advisory or determinative role in regard to the content of the dispute or the outcome of its resolution, but may advise on or determine the process of mediation whereby resolution is attempted.

[31]    Mediation is a process whereby, as the above definition confirms, parties to a dispute are assisted in identifying options to resolve the dispute between them. The options available to the parties to resolve their dispute may be wide and flexible when compared with the orders that would be open to be made by a court were their dispute litigated. The options available to the parties at mediation may include a win-win option. Options available early in the history of a dispute may not be available later.

[32]    Court referrals to mediation reflect judicial appreciation of the skills of experienced mediators. The skills required of a mediator are different skills from those required of a litigator. A well-conducted mediation is not simply an occasion for each side to give consideration, with the assistance of the mediator, to the strength of its legal case and concomitantly to the extent to which it may be willing to compromise on its formal legal position. The respective business operations of the parties in this case led me to conclude that, provided it could take place at a relatively early stage in the dispute resolution process, mediation could well result in the identification of options for resolution of the dispute that would not be available to the court.

  1. I accept that the process of mediation, as it is understood (in particular among lawyers) may frequently, or indeed mostly, have the characteristics identified in the reference her Honour cited at [30] and explained at [31]. However, I see no reason why all, or any particular number, of those features must be present before there can be a mediation.

  2. Further, and taking the reference cited by her Honour:

  1. the present parties must have known, after 11 days of hearing, what the disputed issues were;

  2. by participating in the process, the parties must have been prepared to “consider alternatives and endeavour to reach an agreement” (there has been no suggestion that either party was acting other than in good faith in participating in the mediation);

  3. the Arbitrator did not take any advisory or determinative role at this particular time; and

  4. the Arbitrator himself determined “the process of mediation whereby resolution [was] attempted”.

  1. When the parties agreed to participate in mediation, and to the Arbitrator’s acting as mediator, they did not know what it was that he proposed to put to them “under the cloak of mediation”. They did not know how the mediation would develop (if it did). As things turned out, the mediation did not progress beyond the parties’ reception, consideration and rejection of the proposal the Arbitrator put. But the parties were not to know that when they agreed to participate in the mediation. I do not understand why it is that the process that they agreed to undertake, and (at the outset) thought they were undertaking should be said not to have happened simply because the process did not go so far as might have been expected.

  2. What happened after the s 27D(1) consent had been signed was non-arbitral in character. The course of the arbitration was interrupted; Counsel’s submissions (Mr Debuse, for the Council) stopped for the moment, and did not resume until the mediation had concluded. What happened during the mediation was not recorded, unlike everything else done in the course of the arbitration. And the mediation was not conducted in the hearing room. It was conducted, instead, in one of the breakout rooms.

  3. Clearly, the parties intended to mediate, with the Arbitrator acting as mediator. Clearly, when they left the hearing room for the security of the breakout room, and the Arbitrator put his proposal to them, they thought that they were engaging in mediation. Why should the court take a different view?

  4. The Act, like any legislation, is to be construed so far as possible so as to promote simplicity and certainty of operation. The construction for which the Council contended does not do that. On the contrary, the Council’s construction means that no one will know whether consent under s 27D(4) is required, to avoid the arbitrator’s losing his or her mandate, until something happens in an extra-arbitral (to use, for the moment, a neutral term) meeting that crosses a line, nowhere defined expressly in the Act, that marks the start of mediation. I do not think that such a construction should be adopted unless the language of the Act, by its very intractability, so requires.

  5. On the other hand, the construction for which Ichor contends promotes simplicity and clarity of operation. Where parties to an arbitration intend to mediate, with the arbitrator acting as mediator, sign the consent which is the statutory precondition for the arbitrator so to act, and thereafter engage in a process which they believe to be mediation (and which of its nature is non-arbitral in function), they cannot thereafter resume the arbitration with that arbitrator continuing to act, unless the requirements of s 27D(4) are met.

  6. I accept that there may be rare cases where, even on Ichor’s approach to construction, there could be some doubt as to whether an arbitrator has acted as mediator. But such cases (if there prove to be any) will occur far less frequently than they are likely to do on the Council’s approach.

  7. I conclude that the Arbitrator in this case did act as a mediator, and that there did take place a mediation between the parties. It follows that, upon termination of that mediation, the Arbitrator had no mandate to continue to act as arbitrator unless the parties gave their written consent to his so doing, as required by s 27D(4).

Second issue: consent in writing

  1. It seems that when the mediation terminated, the parties overlooked the requirements of s 27D(4) and the effect of s 27D(6). They continued with submissions although no document, equivalent to the consent under s 27D(1) signed before mediation commenced, was brought into existence or signed.

  2. Dr Birch submitted that this did not matter. He noted that Ichor, through Counsel, had participated in the continuation of the arbitration. Mr Debuse, for the Council, continued with his submissions (Mr Duggan being present, and at one stage interjecting [4] ). When Mr Debuse finished his submissions, the Arbitrator called on Mr Duggan, who replied [5] :

Thank you, I’ll be relatively brief. Can I just hand this out. This is a schedule for the site diaries that we promised earlier.

4. Arbitration transcript 994.29.

5. Arbitration transcript 1000 32-.34.

  1. Thereafter Mr Duggan proceeded with his submissions. At one point, in answer to a comment from Mr Debuse that apparently the Arbitrator had invited, Mr Duggan said [6] :

I don’t want to endanger finishing today…

6. Arbitration transcript 1005.15.

  1. Once submissions had been completed, the Arbitrator reserved his decision. In the course of doing so, he said that he wished to:

put on the record that I have some time problems in responding to the complexity that’s now before me [7] .

7. Arbitration transcript 1013.16-.18.

  1. Dr Birch pointed out that the transcription service had been retained jointly by the parties, and that each was liable for one-half of the transcription costs. He submitted that:

  1. it was clear from Mr Duggan’s submissions that Ichor consented to the Arbitrator’s continuing with the arbitration; and

  2. the recording of those submissions, by the “agent” that Ichor had jointly engaged with the Council, was a sufficient written record of that consent.

  1. Dr Birch relied on s 21 of the Interpretation Act 1987 (NSW). That section provides, among other things, that writing “includes printing, photography, photocopying, lithography, typewriting and any other mode of representing or reproducing words in visible form”. I am not quite sure of the relevance of this submission, as there can be no doubt that a written transcript was produced.

  2. Mr Ashhurst submitted that it was necessary that there be an express consent in writing to the resumption of the arbitration, just as it was necessary for there to be such a consent for the Arbitrator to act as mediator (s 27D(1)). Mr Ashhurst submitted, further, that nothing said or done by Mr Duggan in the course of submissions once the arbitration resumed amounted to an unequivocal indication of consent.

  3. In my view, the construction for which Ichor contends is correct. As I have said, the Act should be construed so as to promote certainty of operation. Where written consent is required for something to happen, what is needed to satisfy that requirement is a written expression of consent signed for or by, or otherwise attributable to, the party whose written consent is required. The writing must make clear that the party consents to whatever it is that cannot happen without written consent. Where such a document exists (as the s 27D(1) consent existed, so as to authorise the arbitrator to act as mediator), there can be no doubt that the pre-condition has been satisfied.

  4. The Act contemplates in a number of places that parties may have agreed upon something, or that they are free to agree upon something. For example:

  1. s 3(1) provides how written communications are to be received “unless otherwise agreed by the parties”;

  2. s 17(1) provides that an arbitral tribunal may grant interim relief “unless otherwise agreed by the parties”;

  3. s 10(1) provides that parties “are free to determine the number of arbitrators” (and, in s 10(2), the consequences of failing to reach agreement are spelled out); and

  4. s 13(1) provides that parties “are free to agree on a procedure for challenging an arbitrator”.

  5. That list of examples is by no means comprehensive.

  1. Throughout the Act, where it contemplates that the parties may have agreed on something or leaves the parties free to do so, there is no provision for the form or authentication of the parties’ agreement. By contrast, although s 27D in substance allows the parties to agree to an arbitrator’s acting as mediator, and to agree to the arbitrator’s resuming the arbitration if the mediation fails, there is specific provision that each such agreement is to be embodied in the written consent of each party (or all parties).

  2. Section 27D(7) expressly contemplates that an arbitrator, acting as mediator, may receive confidential information from one or more of the parties. That is not uncommon, and the legislature must be taken to have known this. That, no doubt, helps to explain why the legislature thought it was important to provide that an arbitrator who has acted as mediator cannot thereafter resume acting as arbitrator unless the parties consent, and do so after termination of the mediation. The timing and the requirement for that consent to be written both emphasise its importance.

  3. It is also, in my view, significant that the requirement for written consent in subs (4) is reinforced by the deemed termination of mandate for which subs (6) provides. Once the mediation terminates, the arbitrator cannot resume acting as arbitrator unless the parties have given their written consent. The requirement for written consent, in effect to avert the consequences otherwise prescribed by subs (6), tells strongly against acceptance of the proposition that consent may be inferred, not just from conduct recorded in writing before the arbitration resumes, but from conduct recorded in writing that occurred after the purported but unauthorised resumption of the arbitration.

  4. The parties (and for that matter the Arbitrator) are entitled to know where they stand, in any situation where the written consent of a party or all parties is required. They will know where they stand if the appropriate document is produced and authenticated. That approach satisfies the requirement for certainty. It is simply a matter of examining the document to see whether it satisfies the statutory requirement.

  5. Again, the Council’s approach does not lead to certainty. It requires an examination of something that happened whilst there was no mandate for its happening, to see whether consent can be inferred or presumed from what happened. If consent can be inferred or presumed then, on the Council’s approach, that which initially was done without a mandate is, apparently, retrospectively transformed. That approach is antithetical to certainty.

  6. The approach for which the Council contended accepts that, unless and until (after the termination of the mediation) written consent were given, the Arbitrator had no mandate to continue with the arbitration. However, consent inferred or presumed from the transcript of what happened after the mediation (something that could have not been part of the arbitration, because absent consent the Arbitrator had no mandate to continue with the arbitration) may be used for the purpose of inferring or presuming consent. That bootstraps exercise is more than a little puzzling.

  7. I conclude that Ichor did not give its consent in writing, as required by s 27D(4) of the Act, to the Arbitrator’s conducting the arbitration proceedings after the mediation had terminated. On that basis, it is not necessary to deal with Mr Ashhurst’s alternative submission, that in any event what was said and done is not a sufficient manifestation of consent.

Third issue: waiver

  1. Although the case as pleaded appeared to involve whatever may be comprehended by the general law notion of waiver (as to which, see by way of example only Agricultural and Rural Finance Pty Ltd v Gardiner [8] ), and thus may have extended to the concept of election between inconsistent rights, the position was clarified in the course of Dr Birch’s submissions. He confirmed that what the Council relied upon was what might be called “statutory waiver”: waiver of the kind dealt with in s 4 of the Act.

    8. (2008) 238 CLR 570.

  2. Section 4 reads as follows:

4   Waiver of right to object

(cf Model Law Art 4)

A party who knows that any provision of this Act from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating the party’s objection to such non-compliance without undue delay or, if a time-limit is provided for stating the party’s objection, within such period of time, is taken to have waived the party’s right to object.

  1. Dr Birch submitted that s 27D(4) was a provision of the Act from which the parties could derogate, and that they had done so by proceeding with the arbitration once the mediation had terminated. He submitted that the lapse of time until Ichor did protest (by letter written on 6 April 2018, some four working days after 29 March 2018, the last date on which the hearing was conducted) amounted to “undue delay”.

  2. Mr Ashhurst submitted that s 4 required actual knowledge of non-compliance. He referred to records of the United Nations Commission on International Trade Law (UNCITRAL) showing how Article 4 of the Model Law had evolved. He submitted, correctly, that by reason of s 2A of the Act, it was appropriate both to have regard to those documents and to seek to promote a construction that was consistent with the wording of the Model Law.

  3. In my view, s 4 does require actual knowledge. It does not contain the time-hallowed phrase “knows or ought to know”. Reference to the deliberations of UNCITRAL shows that this is intentional.

  4. The report of the Secretary-General of the United Nations to the 18th session of UNCITRAL [9] contained a draft of articles of the Model Law. The draft of Article 4 commenced:

A party who knows or ought to have known…

9. Report dated 25 March 1985; the eighteenth session was to be held on 3 to 21 June 1985.

  1. The report of the 18th session of UNCITRAL stated, in relation to the draft of Article 4:

54.   As regards the contents of article 4, various suggestions were made. It was suggested that, as to the imputed knowledge of a party, the wording “or ought to have known” should either be deleted or be made more precise and less rigid [sic] by requiring ordinary care or reasonable diligence. Noting that those words were not contained in the corresponding provision in the UNCITRAL Arbitration Rules (article 30), the Commission decided to delete them since they might create more problems than they solved.

  1. In short, the deletion of the words “or ought to have known” was deliberate. That deliberate drafting choice was picked up in s 4 of the Act.

  2. The unchallenged evidence of Ichor, including of its principal Mr Filis, was that it did not know of the requirements of s 27D(4) until the day when the letter to which I have referred was written.

  3. In the absence of such knowledge, there was no possibility for s 4 to operate during the continuation of the arbitration, following termination of the mediation, on 29 March 2018. It is clear, although somewhat puzzling, that no one was aware of the requirements of s 27D(4) at that time. When Ichor, through its lawyers, did become aware of the requirement for consent in writing, it sent the letter to which I have referred.

  4. It follows that there was no waiver.

  5. The foregoing analysis assumes that s 27D(4) is, for the purposes of s 4, a provision of the Act “from which the parties may derogate”. That concept is somewhat obscure. The Act provides, as I have noted already, that in some circumstances, the parties to an arbitration agreement are free to agree on some subjects, and that if they do, their agreement will prevail over what the Act has to say on those subjects. Where, by one form of words or another, the Act has that effect and the parties agree accordingly, it is difficult to see how they can be said to “derogate” from the particular provision.

  1. The ordinary meaning of “derogate” is to “take away apart from” or to “detract from” or to “deviate from” [10] . Where the Act expressly provides that parties may agree to the contrary of what is in effect a default procedure, it is difficult to see how, as a matter of language they are derogating from that provision.

    10. Australian Oxford Dictionary, Second Edition, 2004.

  2. It is unnecessary to decide whether “derogate” in s 4 should be given its dictionary meaning, or should be read simply as referring, in effect, to a provision of the Act “from which the parties may agree to depart”. If the latter alternative be correct, then provisions of the Act utilising the forms of wording to which I have referred at [57] above would be provisions from which the parties by agreement could derogate.

  3. My tentative view is that provisions of the kind to which I have referred, if they do not constitute the whole class, are at least part of the class of provisions of the Act from which parties may derogate [11] . Neither Counsel’s submissions nor my own reading of the Act identified any other provisions (that is to say, any provision other than those using verbal formulae of the kind referred to at [57] above) that are derogable. On the Council’s submissions, the requirements of s 27D(4) (and, it must follow by necessity, s 27D(1)) are the only derogable provisions in addition to those of the kinds earlier identified.

    11. That tentative view is, I think, consistent with a leading Australian text. See Doug Jones AO RFD, Commercial Arbitration in Australia (LawBook Co, 2nd edition, 2013) at [1.120].

  4. What is of some significance is that in a number of places, the Act does contemplate that parties may agree to conduct their arbitration in some way different to the “default provisions” (for want of a better expression) that are specified. Where the Act does contemplate this, it says nothing specific about the form that such agreement should take. By contrast, s 27D(4) (and, for that matter, s 27D(1)) do not say in terms that the parties may derogate from their provisions, and they do say in terms how the parties are to record their agreement to the courses of action contemplated. The legislature had available to it several ways of indicating how parties could derogate from a provision of the Act. It did not do so in relation to s 27D(4).

  5. Section 27D(4) provides a precondition to the arbitrator’s regaining his or her mandate once the mediation has terminated. The only way that the arbitrator can do so is by the written consent of all parties. It would be an extraordinary construction of s 4 together with s 27D that permitted the parties to derogate from the requirement for prior written consent through some course of conduct undertaken in ignorance of s 27D(4),(6).

Fourth issue: estoppel

  1. The Council relied on both conventional estoppel and estoppel by representation.

  2. The conventional estoppel was said to be a common assumption, held by each of the parties and known by each party to be held by the other, that if the mediation failed to secure agreement, the arbitrator could proceed with the arbitration. Of necessity (because otherwise the estoppel could have no point), the Council says that the common assumption was so held, and known to be held, before the mediation commenced.

  3. I do not understand how a supposed conventional assumption, of the kind alleged by the Council, could overcome the need for written consent where, as the evidence shows, neither party was aware of the need for written consent. To put it another way, if this argument were to get to first base, it would need to be framed in terms that the parties, knowing before the mediation of the terms of s 27D(4), (6), nonetheless assumed, and understood that the other assumed, that if the mediation failed the Arbitrator could thereafter proceed, as arbitrator, to conduct and conclude the arbitration in the absence of their written consents. That is not the case pleaded. Nor is it the case argued. And even if it were pleaded and argued, it would fail because neither party knew of the terms or operation of s 27D(4), (6) at the time the alleged conventional estoppel is said to have arisen.

  4. This is really another way of saying that, absent knowledge of the terms and effect of s 27D(4), (6), there can be no conventional estoppel. That, I think, was the point made (although in a different statutory context) by Young CJ in Eq (with whom Meagher and Beazley JJA agreed) in Overmyer Industrial Brokers Pty Ltd v Campbells Cash and Carry Pty Ltd [12] at [45], [46].

    12. [2003] NSWCA 305.

  5. I turn to the suggested estoppel by representation. If an estoppel were to have the effect of precluding Ichor from raising the point when it did (and relying upon the point from then until now), there must have been a representation to the effect that no matter what might be said or done in the mediation, if the mediation failed then Ichor would agree to the Arbitrator’s continuing to act as arbitrator. That is not the pleaded representation. Nor is it consistent with common sense or ordinary human experience that a party to a dispute would make a representation to that effect in the circumstances that prevailed up until the commencement of the mediation on 29 March 2018.

  6. If, on the contrary, the estoppel were not to have blanket operation, then its limits do not appear from anything in the Council’s pleading or evidence, nor indeed in Dr Birch’s submissions.

  7. In my view, what was said and done prior to the signing of the s 27D(1) written consent, even accepting at face value all the Council’s evidence and so much of Ichor’s evidence as supports the Council’s case, goes nowhere near establishing a representation to the effect that is required if this part of the Council’s case is to succeed.

  8. I should however record that in my view one factual element of the Council’s case has not been made good. Dr Birch submitted that in the course of the off the record meeting between the Arbitrator and the parties’ legal advisers, the Arbitrator had stated expressly that if the parties did not accept his proposal then they would continue with the arbitration. The only evidence to that effect comes from Mr Taylor, who as I have said was one of the solicitors assisting in the presentation of the Council’s case.

  9. Mr Taylor’s notes of the off the record meeting contain no reference of that statement being made by the Arbitrator. Mr Dissanayake’s evidence was that it was Mr Taylor, not the Arbitrator, who made a statement to the effect of that referred to. Mr Keene, a solicitor assisting in the presentation of Ichor’s case, does not recall the Arbitrator making that statement.

  10. Mr Dreghorn’s evidence does not assist. He was not present at the off the record meeting. He said that Mr Taylor advised him of what was discussed at that meeting. His evidence does not include any reference to Mr Taylor’s telling him that the Arbitrator had said that the arbitration would proceed if the mediation were unsuccessful. Indeed, Mr Dreghorn has a recollection that the Arbitrator said this later, in the hearing room immediately before the lunch adjournment. No one else had any recollection of the Arbitrator having done so. I do not accept that aspect of Mr Dreghorn’s evidence.

  11. Nor do I accept Mr Taylor’s evidence on this point. I repeat that I intend no reflection whatsoever on Mr Taylor’s honesty. The reality is that he had many other things to occupy his mind at the time (including wrapping up his duties in one position with his then employer and, after a vacation, moving to take up another position with a new employer). His timing of the off the record meeting is at odds with the evidence of all the other witnesses, including Mr Dreghorn (to whom Mr Taylor reported the outcome of the meeting). I think that Mr Taylor is in error in this passage of his evidence.

  12. Thus, to the extent that it is a plank of either formulation of the Council’s estoppel case that the Arbitrator said the words in question and Ichor either expressly or by conduct agreed, that is not proved.

  13. In any event, in my view, there is no evidence of detriment. The Council submitted that it had incurred very substantial costs (for legal fees and disbursements, and for the Arbitrator’s fees) up to the point the mediation took place. That may be assumed, but goes nowhere.

  14. Up until that point, those costs had been incurred because the Council wished to proceed with the arbitration. There may have been some time-based costs referable to the period from the lunch adjournment to the conclusion of proceedings on 29 March 2012. However, on the Council’s argument, those costs would have been incurred in any event had Ichor stated, prior to the commencement of the mediation, that it was aware of and reserved its position in relation to s 27D(4), in the event that the mediation terminated unsuccessfully. On that hypothesis, the same costs would have been incurred for the same period of time.

  15. I add for completeness that Mr Ashhurst submitted, in relation to each of the estoppels relied upon, that an estoppel could not lie in the face of, or against the operation of, s 27D(4),(6). Although I think that there is force in that submission, there is no need to express a concluded view, because for the reasons I have given, the Council’s case based on estoppel must fail.

Conclusion and orders

  1. The Council’s claim fails and must be dismissed. There was no cross-claim seeking, for example, a declaration in terms of s 27D(6). Nonetheless, the result of my reasons is clear. In the events that happened, the Arbitrator had and has no mandate to continue with the arbitration proceedings following termination of the mediation on 29 March 2018.

  2. I make the following orders:

  1. order that the proceedings be dismissed.

  2. Order the plaintiff to pay the first defendant’s costs.

  3. Otherwise, make no order as to costs.

  4. Direct that the exhibits be handed out.

**********

Endnotes

Amendments

10 May 2018 - Additional text at the end of paragraph [2].


Additional text to paragraph [67].

Decision last updated: 10 May 2018

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Cases Citing This Decision

1

Ku-ring-gai Council v Ichor Constructions Pty Ltd [2019] NSWCA 2
Cases Cited

4

Statutory Material Cited

2

Hopeshore Pty Ltd v Melroad Equipment Pty Ltd [2004] FCA 1445
Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57
Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305